Does management accounting mediate the relationship between cost system design and performance?

Outline

• Abstract
• Keywords
• 1. Introduction
• 2. Literature Review and Hypotheses
• 2.1. Five Attributes of Cost System Design
• 2.2. Impact of Csd on Maps
• 2.3. Impact of Maps on Performance
• 2.4. Impact of Csd on Performance
• 2.5. Mediating Role of Maps in Csd's Performance Effect
• 3. Research Methodology
• 3.1. Sample
• 4. Results
• 4.1. Exploratory Factor Analysis (efa)
• 4.2. Confirmatory Factor Analysis (cfa)
• 4.3. Structural Equation Model (sem)
• 4.4. Mediating Analysis Using Bootstrapping
• 5. Conclusions
• References

Conclusions

This study aimed at investigating the mediating effect of MAPs on the relationship between CSD and performance. The topic is particularly relevant in these times of increasing competition in the marketplace and tightening profit margins. In such times, firms must utilize sophisticated decision-making tools to enhance their performance. However, utilization of those tools requires extensive cost data. Thus, we examined whether CSD contributes to firm performance via MAPs. The findings indicated that CSD alone does not impact firm performance. However, it does affect performance via MAPs. We proved that MAPs play a full mediating role between CSD and performance. Moreover, it was found that CSD has positive impact on the utilization of MAPs, and MAPs contribute to performance positively.

The study has important implications for firms. Designing a functional cost system does not come for free. It requires the integration of various units in the business, such as accounting, information technology, human resources, and production. Collaboration by these departments can establish and develop a robust and functional system over time, considering the changing needs of organization. Therefore while undertaking such an initiative, managers should carefully weigh the costs of establishing and maintaining an extensive cost system against the benefits it can bring. Thus, this study indicated that incurring high costs for the establishment of a functional cost system could be justified, on the understanding that the firm will utilize the cost data obtained from that system through the various decision-making tools; otherwise, there is no point to bearing the cost of building such a system. In other words, utilization of MAPs justifies the establishment of an extensive cost system, and bearing its costs.

The study has some limitations regarding sample and performance data. The sample included non-financial firms only. Another limitation was that the performance measurement was based upon the respondents’ evaluations rather than real financial data extracted from financial reports, since non-publicly traded firms are unwilling to provide their financial data to the world outside.